Stumbling Around

The powers that be certainly seem to have adopted a management by wandering around (MWA) approach as far as the power sector is concerned. The MWA approach is unstructured, depends on several hit-or-miss moves, and is not based or any pre-determined, thought-out strategies. Though one really cannot expect any well defined, bold policy moves from a regime which has its sights fixed firmly on the upcoming elections, the power sector is reeling under the fallout of a few developments over the past month. And industry players are apprehensive that populism will continue to rule the day, even after a new dispensation comes to power.

It has been repeatedly observed that India´s IT industry success story played out because political parties had absolutely no knowledge of information technology, and they could not come in the way of the development of the sector. However, the power industry has always been a fertile hunting ground for our ruling classes. As we go to press, Maharashtra has announced that it would slip into a revenue deficit, thanks to the huge electricity subsidies (around Rs 9,000 crore) that it has announced. Every stakeholder in the industry knows the kind of bold decisions that have to be taken, but the reforms agenda seems to have taken the backseat. Unless and until the Centre and state governments adopt a coordinated policy towards the power sector, the entire industry will remain at the mercy of the various forces that are buffeting it.

Take for example the oil ministry´s move to hike gas prices from 1st April. This is in sync with the quarterly review of the gas pricing regime, but tariff hikes from states are not in tandem with the periodic revision of gas rates. This is leading up to a situation where the very viability of gas-fired power plants is now under question.

And there are a few looming developments in the coal industry which might completely change the rules of the game. Australia´s coal mining industry is in trouble. Apart from an increase in labour and operating costs, a well-funded and high pitched environmental campaign is threatening to severely curtail Australia´s coking coal exports. Since Australia is a major source for Indian coal imports, any radical green policy move from Canberra-further accentuating the slowdown in Australia´s coal sector-will have severe repercussions on India´s coal linkages for power plants.

Ergo, you can see how the sector is now at the crossroads. It would not be too premature to say that 2014 will be the make-or-break year for the Indian power industry. Our Cover Story in this issue captures the mood of the industry and the sorry state of affairs that it finds itself in.

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